international finance : balance of payment and international monetary system

international finance : balance of payment and international monetary system

Jun 21st, 2015

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International finance - an area of study concerned with the balance of payments (BOP) and the international monetary system. BOP - the record of all values of all transactions; between a country's resident

Introduction International finance: an area of study concerned with the balance of payments (BOP) and the international monetary system. Balance of Payments Balance of payments (BOP): The record of all values of all transactions; between a countrys residents and the rest of the world.Measuring a countrys economic activity is by looking at its balance of payments. There are a wide variety of account that determine the BOP, but for purposes of analysis they can be grouped into three broad categories1. current account items, 2. capital account items, 3. And reserves. Every transaction is recorded in terms of a both a debit and a credit. Import of a good or service, an increase in assets, or a reduction in liabilities. Credits record the export of a good or service, a decrease in assets, or an increase in liabilities. Broad BOP categories International Monetary Fund (IMF): An agency that seeks to maintain balance of payments stability in the international financial system Current accountThe current account consists of Merchandise trade, services, and Unrequited transfers. Merchandise trade is typically the first part of the current. It receives more attention than any of the other accounts because this is where the imports and exports of goods are reported, and these are often the largest single component of all international transactions. In this account, sales of goods to foreigners {exports} are reported as credits